Corporate guarantee liability upheld where default, debt acknowledgement, and a complete insolvency application justified CIRP admission.

A section 7 application under the Insolvency and Bankruptcy Code was found to be within limitation and properly authorised because prior recall and guarantee invocation notices were followed by a revival letter acknowledging liability, and the filing was supported by board-approved delegation. The corporate guarantee was held validly invoked and binding on the corporate debtor, as the guarantee was continuing, irrevocable, and enforceable on a joint and several basis despite disputes with the borrower. Default was established from the NPA classification, outstanding debt record, and acknowledged liability, so the application was complete and CIRP was admitted with moratorium and appointment of the Interim Resolution Professional.

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Issues: (i) whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation and duly authorised; (ii) whether the corporate guarantee was validly invoked and the corporate debtor remained liable as guarantor; (iii) whether default in repayment of a financial debt was established so as to admit the application and commence CIRP.

Issue (i): whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation and duly authorised.

Analysis: The application was filed on 26.10.2018. The record showed recall and guarantee invocation notices in 2016, followed by a revival letter dated 07.03.2017 acknowledging the liability. The filing was supported by the internal delegation of power and board-approved authorisation, and the objection to locus was not accepted.

Conclusion: The application was held to be within limitation and properly authorised.

Issue (ii): whether the corporate guarantee was validly invoked and the corporate debtor remained liable as guarantor.

Analysis: The corporate debtor had executed the corporate guarantee in favour of the consortium security structure, and the guarantee terms made it continuing, irrevocable, and enforceable notwithstanding variation, security issues, or disputes between borrower and lenders. The notices on record showed invocation of the guarantee, and the corporate debtor's liability was treated as joint and several with the borrower.

Conclusion: The corporate guarantee was held to be validly invoked and binding on the corporate debtor.

Issue (iii): whether default in repayment of a financial debt was established so as to admit the application and commence CIRP.

Analysis: The borrower account was classified as NPA on 30.04.2016, the outstanding debt was proved from the record, and the corporate debtor had acknowledged the debt in the security documentation and revival letter. The Tribunal found the application complete under section 7(5) of the Insolvency and Bankruptcy Code, 2016 and sufficient default to warrant admission.

Conclusion: Default was held established and the application was admitted, with initiation of CIRP and appointment of the Interim Resolution Professional.

Final Conclusion: The corporate insolvency resolution process was directed to commence against the corporate debtor, and moratorium under the Insolvency and Bankruptcy Code, 2016 followed.

Ratio Decidendi: A corporate guarantor remains liable under a continuing and irrevocable guarantee where default by the borrower is established, the debt is acknowledged, and the section 7 application is complete and within limitation.

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